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Risk Management

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A risk is the probability of loss, danger or damage. Risks can come from uncertainty, deliberate acts, or unpredictable and unforeseen events. Risk management is about reducing the probability of a risk occurring. Once a risk has occurred, it becomes a problem, or issue. Risk management therefore also considers reducing the impact of issues.

As in stakeholder management, the five steps involved in risk management are as shown below. The process is repeated and refined throughout the project.

Risk Management Process

Some approaches add an explicit knowledge or learning step in addition to the track step. For the purposes of this post I’m assuming that risk management histories are available to subsequent projects.

Identification

When identifying risk, try to find gaps in knowledge about the project and its environment. When a project starts, organise a workshop or brainstorming (vomit) activity with all stakeholders to identify risks. Do not leave risk identification to the project manager. Continue to identify risks as the project progresses. At a minimum, capture the following information for each risk:

Analysis

During this step risks are examined and priorotised. The most common way of quantifying risk exposure is to quantify risk probability and impact. The quantities can be multiplied together to calculate risk exposure.

Planning

The first step during risk planning is choosing an approach to dealing with each risk. The following list contains some common approaches to risks:

If the risk is going to be managed, a mitigation and contingency plan are formulated and documented. The risk is also assigned to a stakeholder, who is responsible to executing the mitigation and contingency plans.

Tracking

During this step the team is actively executing mitigation steps to reduce the probability of risks, or performing activities related to contingency plans because triggers have been reached. Risk status is actively tracked, updated and communicated. Some commonly-used status types are:

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